"People who have paid back previous loans on schedule are more likely to pay back future loans on schedule" is not arbitrary.
You don't go bankrupt when you are late paying back a loan or miss payments or even default on a loan completely.
There are all sorts of cases where a person is not trustworthy with money that do not show up in the public record. That's why credit bureaus came to exist, and although their business practices and data security leave much to be desired, I understand why they exist in the first place.
If they broke the contract, it's on you to bring them to court. Apparently companies thought it was to expensive to enforce contracts, so they decided to create this extrajudicial system.
My point is, if you can't physically pay your debts, you can file for bankruptcy. That is the public record.
To quote Inigo Montoya, you keep using that word. I do not think it means what you think it means.